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German business sentiment rises in January

Image source: SpreePIX Media | Visit Berlin

German business sentiment rose in January, according to a survey by the influential Ifo Institute for Economic Research published on Monday.

The Munich-based center said its business climate index rose to 106.7 this month, above a forecast 106.3 by analysts polled by Reuters. It marks the third consecutive monthly increase in the index, and the president of Ifo said the German economy had made a "good start to the year."

"Companies were far more satisfied with their current business situation and the majority was also optimistic about the business outlook," Hans Werner-Sinn said.

Last week, a survey by Germany's Centre for Economic Research (ZEW) showed that German economic sentiment had rocketed beyond expectations in January.

The Ifo current conditions index also stood at 111.7 in January, above a consensus forecast of 106.3.

The data were "encouraging" according to Naeem Aslam, chief market analyst at Ava Trade, but he said that Greece would continue to weigh on market sentiment, after the anti-austerity party Syriza won a general election Sunday.

"Greek headlines are very much dominating the headlines today and this is the center of focus. Traders are punishing the banking sector, especially in Greek market, which could be under trouble very soon as the liquidity issues surface soon," he added.

Meanwhile, Jennifer McKeown, senior European economist at Capital Economics, said the rise in the Ifo index suggested that fears about a possible Greek crisis affecting Germany had been offset by the perceived benefits of a weaker euro and quantitative easing by the European Central Bank.

"As the euro's weakness continues to help exporters and the implementation of QE perhaps drives the currency or businesses' borrowing costs down further, confidence and growth might continue to rise," McKeown said in a note Monday.

"But these effects are likely to be at least partly offset by worries about Greece and other peripheral economies. On balance, we still expect steady German GDP (gross domestic product) growth of around 1.0 percent this year and 1.5 percent in 2016."

- By CNBC's Holly Ellyatt